What is Balance Transfers of Credit Card Debt?

Transferring the balance of a credit card debt is simply paying off high interest credit cards or loans with lower interest credit cards.

The benefit of transferring a balance is that one can substantially lower the interest rate of the debt, which helps one pay off the balance in less time and with less money. The negative of a balance transfer are the fine print. A “low interest” card may only last a few months or change at anytime.

Be sure to also avoid “cross default clauses” of the fine print which state that if you become late on anything you owe, including a phone bill or medical bill, then the interest rate goes from the low to a high default rate.

Make sure that the low rate does not only apply to new purchases or will be considered a cash advance and carry a higher rate.

Therefore, make sure to read all of the fine print and ask these questions to a customer service representative before transferring a balance for a lower rate.

A-LAW DIRECTORY

Is it Possible to Reverse a Foreclosure?

          The short answer: Maybe.  If the foreclosure was conducted improperly then there are limited remedies, but only in a few rare situations can a reversal be granted. And those remedies are not statutory based.  Our office has successfully reversed a foreclosure.  In that instance the homeowner received a letter from her servicer stating that they would not foreclose on her property within the next 20 days because she was in a modification trial period.  The letter also stated that if foreclosure proceedings had begun (which they had) they would be ceased.  Well our client relied on this letter and decided not to file a bankruptcy, which would’ve ceased the foreclosure.  After the foreclosure the bank tried to evict her but we showed up to court with that letter and the bank agreed to reverse the foreclosure. 

           There is also another way in which a foreclosure can be reversed, but this is more of a technicality.  For any real estate to change owners, the sale must occur in writing.  It is not possible to transfer real property without a writing.  Thus a foreclosure is effectuated in writing through a Trustee’s Deed.  Well, in Tennessee, foreclosures occur as an auction at the court house steps.  The problem is that just because a winner was selected at the highest bid and the gavel struck does not make the property sold.  It must be conveyed through a Trustees Deed.  Many foreclosures result in the lending bank buying the property themselves for the amount of the loan.  When that is the case there is usually no hurry to prepare a Deed and it may take them 7 days, 10 days, or 2 weeks to sign a Trustee’s Deed.  If that is the case and a bankruptcy is filed before the Trustee’s Deed has been signed, then the sale never actually occurred.  So while technically the foreclosure was not reversed, it was still prevented after a winner was selected and “sold” during an auction.

What is the Automatic Stay?

The Automatic stay is one of the primary reasons that people file for bankruptcy. The automatic stay is a legal protection that is given to a debtor when he files bankruptcy. No court order is needed to create the stay, hence the term “automatic.” The instant a petition is filed, federal law makes it illegal for creditors to attempt to collect the debts of a debtor. If a creditor knowingly takes action against the debtor then the creditor will be liable to the debtor for any damages, attorney fees, and costs incurred against the debtor, plus possible punitive damages if the violation is egregious.

Therefore, the automatic stay stops all foreclosures, repossessions, law suits, levies, harassing calls, letters, etc. Furthermore, if a car has been repossessed filing bankruptcy within 10 days can actually allow a debtor to get the car back.

Now some restrictions may apply depending on the debtor's individual circumstances, but the automatic stay is a great benefit to filing bankruptcy.

Wrongfully Foreclosed? 4 Tips to Protect Your Rights!

      Since the collapse of the housing market in 2008, the number of foreclosures on people’s homes has dramatically increased.  However, with that increase of workload on the bank’s, not all of the foreclosures were properly done.  Now if you are the victim of a Wrongful Foreclosure, there are certain steps you must take to protect your rights. 

  

     First, as with any legal issue, consult an attorney immediately.

     Second, if you get served with detainer warrant, you MUST attend the hearing.  A detainer warrant is how an eviction is done in Tennessee.  After your home is foreclosed on the Bank will open a law suit to gain possession of the property.  There will be a hearing and it will be in front of a judge.  It is absolutely critical in your case to show up to this hearing and tell the judge that you were wrongfully foreclosed on.  Many strong wrongful foreclosure cases in Tennessee have been later dismissed because at that original hearing, the victim did not claim wrongful foreclosure.  There is a legal doctrine called Res Judicata, which means that the same issues cannot be litigated again in a different court.  And by failing to raise an issue out of the same fact scenario and circumstance bars that claim forever.  Now, the law in Tennessee is not settled on this issue with foreclosure, but it is not worth having to fight that battle.  Show up to the hearing!  Be sure to bring up the wrongful foreclosure at the eviction proceeding.   Hire and have an attorney there with you.

 

      Third, start building up a savings fund.  Because you were foreclosed on and still living in the property, you are not paying a mortgage or rent.  So start paying yourself the rent/mortgage.  For example, if your mortgage was $1,000 per month, then on the first of every month take $1,000 and place it in a separate savings account so you will not spend it.  This fund will help you in many ways.  It will help you find a new place to live and move if unsuccessful, and it will help you make bond if you sue for wrongful foreclosure.  If you sue, then the Bank is not able to sell that house or have someone living in it paying rent or a mortgage.  So to protect them, most courts will require you to purchase a bond in the amount of the year’s mortgage from an insurance company.  This account will help with that purchase. 

 

       Lastly, save every written communication between you and the bank, save every payment and statement, and take detailed notes on phone conversations you have with the bank.  All of this could be critical evidence in a wrongful foreclosure case.

 

      Tennessee laws weigh heavily in the favor or mortgage companies.  It is difficult to reverse a foreclosure once it has happened, but we have done it in the past.  Call us to protect your rights. 

How much does a Bankruptcy Cost?

      This is a frequently asked question in the bankruptcy world.  How much does a bankruptcy cost, and how am I supposed to pay for it?

     

      Well first it depends on under which chapter you are filing bankruptcy.  Chapter 7 is the least expensive, but you must first qualify, and there are lots of restrictions.  Chapter 13 is next highest, but with relatively low risk if you have a job and can afford your repayment plan.  As for Chapter 11, if you have to ask, you cannot afford it.

 

      Currently in the Middle District of Tennessee, which consists of Nashville and surrounding counties, the filing fee for a Chapter 7 is $306, Chapter 13 is $281, and Chapter 11 is $1,213 but also with quarterly fees that depend on how much debt is owed. 

 

      For Chapter 7 and Chapter 13 debtors, the filing fee does not need to be immediately paid. For Chapter 13 debtors, the trustee will pay the fee for you out of your monthly payments.   For Chapter 7 debtors, they have up to 4 months to pay the filing fee; however, failure to do so will result in closing of the case without a discharge.  Thus we recommend paying the fee up front.

 

      The attorney fees for bankruptcy are set by the court.  Chapter 7 fees can range from $1,000 to $1,500 depending on how complicated the case is.  Some newer attorneys and high volume law firms will charge less, but like most things in life, you get what you paid for. 

 

      As for Chapter 13 cases, the fee can range from $2,500 to $4,000, but these fees are paid through the monthly plan payments and are disbursed by the Trustee of the case.  Also, chapter 13 fees are higher because the case lasts from 3 to 5 years. 

 

      Lastly, are the counseling courses.  The 2005 amendments to the bankruptcy code requires that debtors attend 2 budgeting courses.  The course holder must be a non-profit agency and approved by the Bankruptcy court.  The agencies that we recommend our clients to charge $25 for the first course and $15 for the second course.  In a chapter 13, however, the trustee will teach the second course for free. 

 

      At our firm, we do take pro-bono cases and will charge less fees for individuals who truly cannot afford the fee.

How to File Bankruptcy?

      The easiest answer is to call a local attorney, explain your situation, and then see what she advises. However, the point of this post is to explain what you need to do in order to file a bankruptcy petition.

1)      Collect and compile all of your debts.  Pull your credit report, for free with no strings at annualcreditreport.com.  Gather all bills, statements, and collection letters from your creditors to make sure you have all account numbers, balances, recent payments made, their names and addresses.  All of this information, except for the account numbers, must be included in your bankruptcy petition. So get all of this organized.

 

2)      File your taxes.  Bankruptcy law does not allow you to file a bankruptcy unless you have filed your taxes.  It does not matter if today is February 3 and you have until April 15.  Bankruptcy law will not grant you a discharge unless you have filed your taxes.

3)      Collect and organize your previous 6 months of paystubs or other proof of income.  The Bankruptcy court requires that you disclosure all income received and its source from the previous six months prior to filing the case.  The court also requires that the previous 2 months of income statements be submitted to the US Trustee’s office for review. 

4)      Organize and know all of your assets.  In your petition, you will have to list everything you own.  The underlying, extremely simplified premise behind bankruptcy is: that when you file a trustee is appointed to your case who has the ability to take and sell everything you own, use that money to pay your debts, and whatever debts still remain are discharged, or “wiped away.”  Well, having everything you own being sold does not really help with a “fresh start,” therefore, federal and state law allow you to keep certain items to a certain amount.  That is why you need to tell the court everything you own, so the trustee can calculate the value of your assets and determine which ones are exempt and which ones are not exempt from seizure. 

5)      Property Identification.  The Bankruptcy Court requires government photo-id and government issued social security number.  You cannot use a tax return, because you send that to the government. You need your SSN card, Medicare Card, W-2, or Tax Transcript because those are from the government.

       Filing bankruptcy is a completed process and we strongly urge that you hire an attorney to represent you in a bankruptcy case instead of trying this on your own, but having the above things taken care of will significantly help with a smooth process. 

 

 

What happens to my Chapter 13 Bankruptcy Payments if my case is dismissed?

       The answer to the above question used to depend on how far along a person was in their bankruptcy plan.  The law was well settled that if a case was dismissed prior to the Court issuing an order of a debtor's plan, then the plan payments held by the trustee would go back to the debtor subject to only administration costs.

       Prior to just a couple of weeks ago, here in Middle Tennessee, if a case was dismissed after the plan had been confirmed any funds held by the trustee at that time were sent to the creditors in accordance with the plan since those payments were received by the Trustee when the case, and therefore the plan, was still alive. However, that was the custom.  The Middle Tennessee Bankruptcy Court just recently issued an opinion stating that any funds being held by the trustee when the case is dismissed will go back to the debtor, subject to any objections after parties have been given notice to file applications for that money. 

       Now, any funds received by the Trustee after the case was dismissed, because funds were in the mail or sent prior to an employer receiving notice of the dismissal, are sent back to the debtor.  That stills holds true.  The change in the disbursement of funds was limited only to funds received prior to dismissal, but not yet disbursed.  Good news for debtors, bad for creditors.

Can I Discharge my Traffic Tickets in Bankruptcy?

One of the questions we receive quite often is whether or not traffic tickets and other court costs are dischargeable in bankruptcy?  Many debts are not dischargeable such as some income taxes, child support, and most student loans.  For traffic tickets we have to look at the Bankruptcy in detail.

 

Section 523(a)(7) of the bankruptcy code states:

 

"a discharge under section 727, 1141, 1228(a), or 1328(b) of this title does not discharge an individual from any debt – to the extent such debt is for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss, other than a tax penalty."

 

In a Chapter 7 case, government fines are not dischargeable, including criminal fines.  A Chapter 13 debtor, however, who completes his case and receives a discharge may be able to discharge certain non-criminal government fines.  Section 1328(a)(3) of the bankruptcy code states that a Chapter 13 debtor who completes all payments under the Plan receives a discharge "of all debts provided for by the plan or disallowed under section 502 of this title, except any debt – for restitution, or a criminal fine, included in a sentence on the debtor's conviction of a crime."

 

Therefore, if your fine is for a criminal act determined by state law, it is not dischargeable in Chapter 7 or Chapter 13. If the fine is considered a civil penalty, it is not dischargeable in Chapter 7, but  it is dischargeable in your Chapter 13 case.

 

 

5 Tips to Avoid Foreclosure

1.      Prioritize!

 

 

In order to keep  your home out of foreclosure, you need to make your house the number priority.  We see many cases where a person’s obligations exceed his income, and it is the mortgage that does not get paid.  Instead of missing the mortgage: cancel your cable, quit eating out, and take the bus.   Do you want to keep your house or ESPN?  Want to keep your house or your iPhone?  Instead of paying your credit card bill, pay the mortgage.  But the credit card has a 20% interest rate and late fee!  Well, being late on your house equals losing your home!  Therefore, making the house your top priority ahead of your other creditors and daily luxuries can keep you in your home.

 

 

 2.      Savings!

 

 

This tip is two fold.  First, just as Dave Ramsey preaches, you should always have an emergency fund.  Dave says when you are cleaning up your debt to put $1,000 in an emergency fund for when disaster hits.  I personally prefer to have at least the $1,000 but if your mortgage payment is $1,200 then make the fund $1,200.  That way you always have at least one month of a mortgage payment ready just in case you will not be able to make it with your current checking account.  

 

 

Second part of savings.  If you fall behind on your mortgage payments, almost every bank out there will not accept any payments to catch back up unless it is the full amount including late fees, interest, etc.  Therefore, if you are $3,000 behind, and have $1,500 ready to give to the bank, but they won’t accept it, do not keep it in your checking account.  Otherwise you will see your account with an extra $1,500 and it will be used at the grocery, gas, other bills, etc.  Instead, open up a separate savings account, and place that $1,500 in there.  And then when the next month begins and you will owe another mortgage payment, which will not be accepted, pay yourself the mortgage payment in the savings account.  Therefore, you can catch yourself back up and be ready to pay the bank in full. 

 

3.      Watch out for scams!

 

 

There are a plethora of scammers waiting to pounce on desperate homeowners.  Since the home is almost everyone’s prized possession, we are willing to spend lots of money on the hope of a solution.  A lot of people offer services that will stop a foreclosure, but they end up with the money instead of the bank, and instead of you.  Please be careful.  If you choose to go through a third party to work with the bank on stopping the foreclosure, instead of through bankruptcy, use only HUD approved housing counselors:  http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm.

 

 

 4.      Communication!

 

 

Be sure to open all mail you receive from your bank and respond to everything.  The lender might be offering modifications, loan restructuring or other relief options to help you keep your home.  You need to know your rights and options and you cannot do that unless you open all of your mail.  Also, be sure to respond to all of it as well.  Keep a record of all communications.  Also, when speaking to a bank representative or customer service, keep a record of the phone calls such as date, time, person, phone number, and notes of the conversation.  These records can help you in the long run with a future cause of action if the bank does not do what they promised you, so you are not going only from memory and “he said, she said.”

 

5.      Bankruptcy

 

 

Bankruptcy is a last resort option, but filing a bankruptcy will stop a foreclosure and allow you to repay the bank over a three to five year period to get caught back up.  Bankruptcy is a legal way to force your bank to listen to you instead of just ignoring you.  Bankruptcy is not for everyone and you must contact a local attorney to see if your situation warrants filing Bankruptcy.  This is something we have much experience and do regularly.   

What is a Chapter 20 Bankruptcy?

       A Chapter 20 Bankruptcy is the situation where a debtor files for Chapter 7, and then immediately refiles another case under Chapter 13.  The purpose are a few reasons why a debtor would want to take this strategy.  The first purpose is to reduce the monthly payments that will be required in a Chapter 13 plan.  If a person has $50,000 of general unsecured consumer debt (such as medical bills and credit cards) and also has $50,000 of student loans, which is not dischargeable, then chapter 13 payments to pay everyone in full would be $1,666.67 per month for 60 months.  However, if the debtor first files Chapter 7 bankruptcy, then $50,000 of the consumer debt would be discharged. After the case is closed the debtor can immediately refile under Chapter 13 in order to pay the nondischarged student loans.  That monthly payment would be $833.33 for 60 months. 

       Another reason to file a chapter 20 is because the debtor exceeds the Chapter 13 debt limits.  Currently, a debtor cannot file a Chapter 13 bankruptcy if the unsecured debt exceeds $360,475.  Chapter 7 has no debt limits.  Thus, a debtor may have $400,000 in unsecured debt, which is mixed with dischargeable and nondischargeable debt, as well as secured debt of a house and car.  The debtor (if he qualifies for a chapter 7) file the chapter 7 first reduce the overall debt to be under the debt limit.  Then the debtor could file a Chapter 13 bankruptcy in order to cram-down the car loan or strip off a second mortgage on a house.

       Now, one thing to remember is that by filing a Chapter 7 first, the debtor will not be eligible for a second discharge in the Chapter 13 bankruptcy.  All of the consumer debt would've already been discharged in the Chapter 7, but the debtor would be liable for any deficiency if he later choose to surrender the house or car in the chapter 13 bankruptcy.  

What are the current Tennessee Estate Taxes?

      Now that is it 2013 the Tennessee inheritance tax exemptions have changed for the better of Tennessee residents. From 2006 through 2012 the estate tax exemption was One-million dollars( $1,000,000.00). In 2013, Tennessee estate tax emption moves up to One-million, two hundred fifty thousand dollars ($1,250,000.00).  That means if a resident of Tennessee dies, $1,250,000 of the person's estate will be transferred to the designees or heirs, without an estate tax.  In 2014, the exemption grows to Two million dollars ($2,000,000.00); in 2015 to five-million dollars ($5,000,000.00); and in 2016 the exemption will be unlimited. 

 

       Now, estate planners must still be wary despite the laxation of taxation for Tennessee residents because federal estate tax will still have to be paid.  Congress was able to act intime to avoid the fiscal cliff consequences for estate planning.  Instead of the $5.12 million exemption being reduced to $1 million the amount remained the same at $5.12 million, but the maximum rate increased from 35% to 40%.  Very importantly, portablility remained intact, so that if one spouse transfers all of his estate to his surviving wife, then the wife may use his and her exemptions when she finally dies, thus being able to have a maximum $10.24 million federal exemption.

 

      Given these changes if you think that your will needs to be redone call your attorney to setup an appointment to specifically talk about your situation.  If you do not have a will, then you should contact an attorney to discuss the legal consequences.